New Instacart transparency will be costly to some stores
Before Wednesday, Instacart customers had no idea if the grocery delivery startup was marking up or discounting the goods it purchased from supermarkets.
Now shoppers will know — but at a cost to retailers.
On Thursday, the San Francisco company said it had partnered with more than half the retailers on its platform to offer what it calls parity pricing. Companies that pay a fee can guarantee prices on Instacart are the same as in- store, said Apoorva Mehta, Instacart’s chief executive officer. Instacart will continue to set prices on items from retailers that do not form partnerships.
“Customers will be able to see which stores are exactly the same prices in stores and which ones are higher than the stores,” Mehta said.
“You’ll be able to choose a store based on what their pricing policy is.”
As of Thursday, Rainbow Grocery, Bi- Rite Market and Falletti Foods have parity pricing, Mehta said. Whole Foods already had such a partnership with the company, and Costco has a partnership in which Instacart sets prices.
“This is something that our customers as well as our retailers were asking for, just to be transparent,” Mehta said.
But it’s likely to pressure some retailers to sign on with Instacart, said analyst Bill Bishop, of research firm Brick Meets Click.
“The retailer has an incentive on the Instacart app to be able to say that the price is the same as in the store and not inflated,” Bishop said. “Retailers are caught really between two forces: One force is their desire to match the consumer’s increasing demand for service like online shopping, the other is to have prices that are seen as competitive in the marketplace.”
He called it a smart move, at least in the short term. Companies that are eager for the extra business Instacart brings will pay the fee, Bishop said. Others might feel pressured to follow, but maybe not for long.
Competition for what are called last- mile delivery services like Instacart are ramping up, Bishop said. Uber Essentials, Google Express and Amazon’s same- day delivery could all pose a threat to Instacart.
Since its launch in 2012, Instacart has expanded quickly and is now available in 15 metropolitan areas, including San Francisco, Los Angeles, Seattle, Denver, New York, Washington and Atlanta.